‘Fee-Harvesting’ Card Seen at Services Credit Union

A credit union that shares leadership with the Illinois Credit Union League is issuing a credit card that consumer advocates have condemned as a consumer unfriendly, “fee-harvesting” card.

The cards are issued by Services Credit Union, a privately insured, state-chartered credit union that lists Daniel Plauda, the CEO of the Illinois Credit Union League, as its CEO and shares the same address as the ICUL.

Consumer advocates define fee-harvesting credit cards as those with low credit limits and high fees. According to 2007 report from the National Consumer Law Center on the topic fee-harvesting cards “share a common thread: high fees that eat up most of an already low credit limit, leaving the consumer with little real, useable credit and at a high price.”

According to a financial statement from private deposit insurer American Share Insurance, Services Credit Union has 1945 members, $227,625 in assets and had net income of $950 as of the end of March of this year.

The statement lists credit card balances worth $24,451, with an average interest rate of 15% as its only loans

ICUL declined a request for an interview.

Services CU does not have a website.

Services is listed as the issuer of two Discover cards, the Matrix card and the Cerulean card, offered by the Continental Finance Co., a nonbank financial firm founded in 2005.

Continental Financial did not returned calls about its cards, but it is one of the companies named as a fee-harvesting issuer in the NCLC report.

The cards are not available in Connecticut, Georgia, Hawaii, Massachusetts, Minnesota, Montana, North Carolina. Washington, and the District of Columbia, according to the CFC’s website, and Continental Finance says that if a cardholder moves to one of these states, it will close the account.

According to disclosures tailored to the states where the cards are issued, the APR for the cards is 29.99%. The cards have credit limits of $300 and each carries an annual fee of $75, which is taken as soon as the card is opened, leaving the cardholder with $225 available credit and an immediate bill for $75. Further, after the first year, the issuer will charge maintenance fees of $144 per year in monthly increments of $12 and will also charge $4.95 per month if the cardholder receives paper ­statements. Other fees will also kick in after the first year.

Further, NCLC said expect the fees to rise. The 2009 Credit Card Accountability Responsibility and Disclosure Act capped such fees charged when a card account is opened at no more than 25% for the first year. But that element of the act has been overturned in court and no regulation has yet replaced it, Chi Woo, staff attorney at the NCLC said. He said he expect Continental Finance and Services CU’s fees to rise later this year.